Investors reacted warmly to the news, with shares trading 1.48% up at 291.21p shortly following the open.

Mr Ashley, who is also Sports Direct's controlling shareholder, said: "I feel like I have lost my right arm, but I do hope to have the opportunity to work with Dave again in the future."

Sports Direct added that Mr Ashley will continue to be supported by the existing executive management team, and Mr Forsey has agreed to facilitate a "smooth handover of his responsibilities".

Mr Forsey, who has been with the retailer for 32 years, said: "I have given my entire working life to the company and in return the company has given me amazing opportunities and experiences. I wish everyone at Sports Direct well in the future."

The news comes after a gruelling year for the business, which has seen Sport Direct come under fire for working conditions at its Shirebrook factory and its corporate governance practices.

Mr Ashley has been lambasted for using zero-hour contracts, presiding over "Victorian" working practices and was grilled by MPs in June, where he admitted that some warehouse staff were paid below the national minimum wage.

Earlier this week, Sports Direct said it is to undertake an independent review of working practices and corporate governance, following concerns raised by shareholders.

Mr Ashley said in a TV interview on Tuesday that things "need fixing" at the firm.

He said: "We definitely had some things we had to fix, and hopefully in the 90 days we've fixed a lot of those things, and there's still, as I said to them at the time, a lot of stuff ongoing that will always remain and need fixing.

"I've said sorry, I've said I'm going to fix it, and I will."

Chairman Keith Hellawell thanked Mr Forsey for his "significant contribution" during a period of significant growth and change at the company.

The firm also announced that Karen Byers has been promoted to the role of global head of operations and Sean Nevitt has been promoted to the role of global head of commercial, both with immediate effect.

Jonathan Pritchard, analyst at Peel Hunt, said: "The management change is interesting but ultimately the shares will succeed or fail on the implementation of the new strategy.

"Moving away from 'pile it high, sell it cheap' and becoming more respectful of third-party brand equity will take time and cultural change but it's the only way."

Mr Forsey also faces criminal charges relating to the collapse of fashion retailer USC, which Sports Direct had acquired.

Proceedings were started against Mr Forsey after "about 80" workers at USC at a warehouse in Scotland were made redundant last year and he is accused of failing to notify authorities in accordance with employment law.

He will appear in court in November.

Jonathan Bartley, co-leader of the Greens, called for Mr Ashley to step aside.

"It is a huge concern that Mike Ashley, a man who apparently allowed Sports Direct to treat its workers so badly, is now considered the right person to take over as chief executive," Mr Bartley said.

"As someone who has admitted to taking his eye off the ball, there will be little confidence from those who work for Sports Direct in his ability to address the mess that the company is in.

"He should consider his position and whether he should step aside in favour of someone more capable and with a proven track record of standing up for employee interests."

Labour's shadow business secretary Jon Trickett said: "Swapping the deck chairs around is not the solution - it's the underlying culture at Sports Direct that needs to be challenged and changed.

"Whether Mike Ashley - who has presided over Sports Direct's objectionable working practices for years - is the right man to bring about the change needed is questionable.

"He will need to end the bullying culture at the company, get rid of zero-hours contracts, stop their over-reliance on agency workers, and address the high levels of workplace injuries."